Information Disclosure in Procurement Auctions with Horizontally Differentiated Suppliers
AbstractThis work studies a model of multidimensional auction in which a buyer needs to procure a given good from either of two potential suppliers whose quality is the buyer's private information and whose production costs are heterogeneous. Costs asymmetries constitute a novelty in this framework and extend e.g. the model of Gal-Or et al. (2007). We compare the outcomes of different procurement policies from the viewpoint of both efficiency and the buyer's payoff. A trade-off between efficiency and rent-extraction emerges. The buyer will maximize her expected utility by selecting a first score auction and either concealing or privately revealing suppliers'quality - the optimal choice depending on the degree of heterogeneity in suppliers' costs and qualities. However, neither of these auction mechanisms will be efficient: efficiency calls for a second score auction or a first score auction with public disclosure of suppliersquality. The findings hinge on the equivalence between auction models and models of horizontal differentiation and take advantage of results for asymmetric auctions developed by Maskin & Riley (2000).
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Bibliographic InfoPaper provided by Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa in its series Working Papers Series with number wp2011_04.rdf.
Length: 31 pages
Date of creation: 2011
Date of revision:
multidimensional auctions; procurement policies; endogenous information; horizontal di¤erentiation; asymmetric auctions.;
Other versions of this item:
- Domenico Colucci & Nicola Doni & Vincenzo Valori, 2011. "Information Disclosure in Procurement Auctions with Horizontally Differentiated Suppliers," DiMaD Working Papers 2011-02, Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-CTA-2011-02-05 (Contract Theory & Applications)
- NEP-IND-2011-02-05 (Industrial Organization)
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- Domenico Colucci & Nicola Doni & Vincenzo Valori, 2012.
"Preferential treatment in procurement auctions through information revelation,"
DiMaD Working Papers
2012-06, Dipartimento di Matematica per le Decisioni, Universita' degli Studi di Firenze.
- Colucci, Domenico & Doni, Nicola & Valori, Vincenzo, 2012. "Preferential treatment in procurement auctions through information revelation," Economics Letters, Elsevier, vol. 117(3), pages 883-886.
- Stoll, Sebastian & Zöttl, Gregor, 2012. "Information Disclosure in Dynamic Buyer-Determined Procurement Auctions: An Empirical Study," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62044, Verein für Socialpolitik / German Economic Association.
- Stoll, Sebastian & Zöttl, Gregor, 2012. "Information Disclosure in Open Non-Binding Procurement Auctions: an Empirical Study," Discussion Papers in Economics 13112, University of Munich, Department of Economics.
- Nicola Doni & Domenico Menicucci, 2011. "Information revelation in procurement auctions with two-sided asymmetric information," Working Papers Series wp2011_14.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
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